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Ramalingam Kalirajan |7281 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 11, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Asked by Anonymous - Jun 27, 2024Hindi

We are two persons, except to survive 30 more years . Owning corpus of 9000000/- rupees & owning a flat to live in. What should be my withdrawal monthly to maintain we two ?

Ans: It's great to see you're planning ahead for your financial future. With a corpus of Rs 90 lakhs and a flat to live in, you’re in a good position to plan for your retirement years. Let's dive into how you can manage your withdrawals to maintain your lifestyle over the next 30 years.

Understanding Your Financial Position
You have Rs 90 lakhs and a home, which eliminates the need for rent. This is a significant advantage. Proper management of this corpus is crucial to ensure it lasts throughout your retirement while maintaining a comfortable lifestyle.

Estimating Monthly Withdrawals
To determine the right amount to withdraw monthly, consider:

Living Expenses: Your current monthly expenses.

Inflation: The rising cost of living over the years.

Healthcare Costs: Medical expenses tend to increase as you age.

Unexpected Expenses: Emergency funds for unforeseen circumstances.

Given these factors, a safe withdrawal rate is often suggested to ensure the corpus lasts.

Investment Strategy for Retirement
Diversification
Diversifying your investments can help manage risks and ensure steady growth. Consider a mix of:

Mutual Funds: A balanced portfolio of equity and debt funds can provide growth and stability.

Fixed Deposits and Bonds: These offer safety and regular interest income.

Power of Compounding
Compounding can significantly boost your returns over time. Even in retirement, reinvesting a portion of your returns can help grow your corpus.

Mutual Funds
Equity Mutual Funds
Equity funds invest in stocks and have the potential for high returns. They come with higher risk but can outpace inflation, making them a good option for long-term growth.

Debt Mutual Funds
Debt funds invest in safer instruments like government bonds and corporate bonds. They offer stability and regular income, which is ideal for retirees.

Actively Managed Funds
Actively managed funds are managed by professionals who aim to outperform the market. They adjust the portfolio based on market conditions, potentially offering better returns than index funds.

Avoid Direct Funds
Direct funds might seem appealing due to lower costs, but regular funds through a Certified Financial Planner (CFP) provide professional advice and management, often leading to better overall returns.

Calculating Safe Withdrawal Rate
A common guideline is the 4% rule, which suggests withdrawing 4% of your initial retirement corpus annually. For Rs 90 lakhs, this equates to Rs 3.6 lakhs per year or Rs 30,000 per month. Adjustments may be needed based on actual expenses and inflation.

Adjusting for Inflation
Inflation can erode purchasing power over time. To combat this, invest in a mix of assets that provide inflation-adjusted returns.

Risk Management
Emergency Fund
Maintain an emergency fund equal to 6-12 months of expenses. This ensures you don’t have to dip into your investments for unexpected costs.

Health Insurance
Ensure you have adequate health insurance to cover medical expenses, reducing the financial burden on your corpus.

Regular Review
Review your financial plan annually with your CFP to adjust for changes in expenses, market conditions, and life circumstances.

Long-Term Care
As you age, consider potential long-term care needs. This might include home care, assisted living, or nursing home expenses. Plan for these by setting aside funds specifically for long-term care.

Legacy Planning
If you wish to leave a legacy for your children or charity, incorporate this into your financial plan. Discuss this with your CFP to ensure your wishes are met.

Final Insights
Managing a retirement corpus requires careful planning and regular monitoring. By diversifying your investments, considering the impact of inflation, and maintaining a prudent withdrawal rate, you can enjoy a comfortable retirement.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.